Government Subsidies for Oil & Gas Companies
Posted on: 21/11/2014

A recent publication brought to light that several rich countries, including UK, Australia and Russia have been offering heavy subsidies to oil, gas and coal companies up to the amounts of $88billion (£55.4billion) a year.

The report by G20 summit in Brisbane, Australia discussed last week how these countries have been offering extremely generous tax breaks to companies working within the oil and gas sector, especially those exploring new reserves. The breakdown that they offered of government’s fuel subsidies showed that in 2013 the UK offered £1.2billion in tax breaks alone, with British think tank ‘Overseas Development Institute’ confirming that such incentives were offered to both multinational companies such as Maersk and Shell, in addition to much smaller ones.

Whilst Britain was not the leader in public funding to oil and gas exploration, with Australia giving $3.5 billion in the same calendar year, it can certainly be considered as one of the most generous when considering the respective sizes of each governments. Between 2009 and 2014 the British government has been seen to offer tax breaks to French, Middle Eastern and American oil companies to support funding for the exploration of North Sea Oil reserves.

One may suggest that the government is offering such tax breaks as a response to the ongoing decline of the coal industry that has been seen for the past few decades, with production 50% lower than it was in 2000. The lack of potential energy from coal has encouraged investment in other methods such as offshore drilling and fracking, large companies such as Shell and BP have already gone public with comments of appraisal for the UK’s favourable tax regime for deep-water offshore drilling, however less response has been given to UK fracking.

It has been continually recognised here at Blueprint that the oil & gas industry can experience turbulent times, and the recent years have stood testament to this. However with these government subsidies the future of this industry becomes more reliable as companies are able to invest more into exploration and development, which is encouraging news for all involved in this sector.

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